Did payday loans make your finances more difficult or impossible? Those loans may have been “unaffordable” and you should not have been given them. You may be able to claim a refund of the interest you paid.
It’s easy to ask for a refund using the free template letters here. You can use these letters with any payday lender. They work if your loans were repaid on time, or late, or you still owe money.
Two special cases:
- if you are still borrowing each month, read Get help to escape from payday loans because you need to do this first. Then you can put in complaints about affordability.
- if you defaulted on a loan, complain to the lender as described here, same letters etc, even if the debt is with a debt collector. But there are some important extra bits so also read Payday loan refunds when you still owe money.
If the lender says No, or offers too little, this article explains how to go to the Financial Ombudsman. It’s easy and many people are getting large payouts!
The comments below have hundreds of readers’ stories of the payday refunds they have been given and the Ombudsman decisions.
What are “unaffordable” loans?
If you could only repay payday loans by borrowing again or from a different lender – your payday loans were probably “unaffordable”. The regulator says:
“the borrower should be able to make the required repayments without undue difficulty, whilst continuing to meet other debt repayment obligations and reasonable regular outgoings.”
So for a payday loan to be affordable, you had to be able to repay it the next month and be able to pay your other bills and debts. If any of the following points apply, the payday lender should have realised the loans weren’t affordable and stopped lending you more:
- you often rolled loans or borrowed again soon after repaying a loan;
- your loans from a lender were increasing in size;
- some repayments were late; or
- the loan was a significant part of your income
If the Financial Ombudsman decides your loans were unaffordable (this is happening a lot – see below!) and the lender should have realised, you will get the interest refunded. That can be a lot of money!
Were you treated unfairly?
If you told the lender you had financial problems the lender should have treated you fairly. read Payday loans: what to expect from your lender if you’re struggling which was written by the payday loan regulator. That has lists of what a lender should (and should not!) have done, for example suggesting you roll a loan or borrow more money.If any of these happened to you, add them your complaint.
How much compensation can you get?
This will depend on your case. If the Ombudsman decides your loans were unaffordable, the question is when should the lender have realised this and stopped lending?
A typical decision by the Ombudsman is to say the payday lender should refund all interest after the third/fourth/fifth loan. This may be earlier if your first loans were rolled or extended a lot.
You aren’t very likely to get a “full refund of all your interest paid”, but ask for the lot and let the Ombudsman decide what is fair. You don’t have calculate anything for your complaint, just ask for:
- a refund of all interest and charges paid plus statutory interest of 8%;
- “unaffordable” loans to be deleted from your credit record.
Wonga and some other lenders have already written off some loans. You may still be able to get compensation if you had earlier loans that you repaid. Again just ask for everything and let the Ombudsman decide. Simple!
If you were treated poorly when you told the lender you were in difficulty, then add something like: “I would like to ask for a refund of interest and charges for all the loans I had. I would also like additional compensation for the way you mishandled my situation when I told you I couldn’t repay a loan.”
So how do you claim a refund? There are three steps:
Step one – get the facts (OPTIONAL)
You may be able to see your full history on the lender’s website if you can log in – if you can, take a copy of it in case it later disappears!
Or you may know your loan details from your emails, bank statements or even your credit report.
If you know these details, skip this step and go to step two.
To get details of the loans you had, email the lender’s Complaints team (see this list of email addresses) and say:
Some lenders make this step hard. See What to do if a payday lender won’t sent you a Statement of Account if your lender is trying to charge you for this or mentions legislation and says they don’t have to send it.
If you don’t get a reply within two weeks, go to Step two and put in a full complaint even though you still don’t know all the details.
Step two – ask for a payday loan refund
Email the lender saying you want to complain because you were given unaffordable loans. This can be a simple letter – just tell your story. You don’t need to mention laws or regulations or supply calculations showing why a loan was unaffordable.
Here is a sample letter for you to change – it needs to tell your story because everyone’s case is different!
Add any other points that help tell your story such as:
- “I took out another loan with xxxx to pay you.”
- “Sometimes I borrowed to pay the rent and then had to top-up to get money for food and petrol.”
- “After I had rolled the loan twice I was so worried about the interest that I repaid it even though this meant not paying my council tax.”
Don’t worry that the lender will say you should have cut back on your living costs – just put down your normal expenses. You don’t need to include evidence, see How much detail should I put in a payday loan complaint?
Some common changes/additions are:
- If you owe money to the lender, ask for any collection activity to stop whilst your complaint is being investigated.
- If you have a balance that was sold to a debt collector you still complain to the original lender – they were the one that made the mistake of lending to you – but also tell the debt collector that you are disputing the debt.
- If you only had one or two payday loans from this lender remove the bits about borrowing more often from the sample letter. The more loans you had from the same lender the easier it is to make your case because the lender should have spotted the repeat borrowing. But even one loan could have been unaffordable, especially if it was rolled several times.
If one of the debts was sold to a debt collector, you still complain to the original lender, not the debt collector, but tell the debt collector you are disputing the debt with the lender – this should prevent any court action whilst your complaint is being considered.
Step three – go to the Financial Ombudsman
If the lender rejects your complaint or offers you a small amount, don’t be depressed – you may still have a good case, they are just hoping you will go away quietly!
From April-June 2017, more than a thousand new cases were sent every month to the Financial Ombudsman. And at the moment 68% of these cases are being upheld – that is a higher success rate than any other type of complaint!
So think about sending your complaint to the Financial Ombudsman if any of the following happen:
- the creditor doesn’t offer you any compensation;
- they don’t reply within eight weeks;
- compensation offered is too low; or
- they refuse to consider all of your loans complaint because some are over 6 years old or have been sold to a debt collector.
Should you give up or go to the Ombudsman?
If the lender has said any of the following, ignore it! They are just trying to put you off, you can still win your case with the Ombudsman.
- they relied on what you said on loan applications and you didn’t give the full facts – see lender says I lied for more about this;
- you repaid some loans early (so what? this doesn’t prove they were affordable, just that you were trying to save interest);
- your borrowing didn’t go up every time (irrelevant – what matters is that you kept borrowing);
- you had a good enough credit score or they didn’t legally have to check your credit record.
If you know how much you paid in interest, this helps you decide if an offer is reasonable or not. Some lenders offer a few hundred pounds to cases which eventually get ten times as much or more from the Ombudsman. People have had large payouts after a complete rejection.
It’s important you get this right:
- don’t worry that you will “lose” a small offer from a lender – this doesn’t happen;
- an offer to write off your current balance may be good or it may be very poor as you should get a refund as well, see Refunds when you have a balance owing for details;
- if you are offered a refund on a few loans, don’t accept if you think you paid a lot more than that it interest.
- accepting an offer settles your whole complaint – you can’t change your mind later.
Don’t automatically take a poor case to the Ombudsman. It’s probably pointless if you only had one loan from a lender, not rolled, which you repaid on time.
But it is the Ombudsman’s job to make these decisions, so if you aren’t sure, ask them to look at it, it doesn’t cost you anything, just a bit of time. It’s not like going to court – one reader said, “They couldn’t be any nicer.”
How the FO works
The Financial Ombudsman has a two stage process. The first level is a FO member of staff called an Adjudicator. The Adjudicator will come to a decision, but unless both sides accept it, the case goes to the second stage where it is considered by an Ombudsman. Most complaints are settled at Adjudicator level – there are 10 times as many Adjudicators as Ombudsmen.
How to send your complaint to the FO
Putting in a complaint to the Financial Ombudsman is easy. You put in a separate complaint about each lender. Their website explains the different ways you can Complain to the Ombudsman. Caroline Wayman, the Chief Ombudsman, says:
It’s really OK to phone up and say, ‘I don’t think it was fair.” It’s not court; you don’t have to turn up with your ‘heads of claim’, you don’t have to write a fancy letter. Tell us your story and we will do the rest.
I like the “do it online” option rather than phoning up. Online you are taken through your complaint step by step and you can attach other information, such as the reply you have had from the lender. You could add some more details, for example, if you disagree with what the lender replied to you.
If some loans are more than six years old, add a bit explaining why you are complaining now, not years ago. Most people knew they were in financial trouble when they were borrowing but had no idea that the lender should have checked for affordability or that they could make an irresponsible lending complaint. So just explain this and say how and when you found out that an affordability complaint was possible (a friend sent me a link about this, I saw it mentioned on Facebook, whatever).
If you don’t have a list of your loans, the Ombudsman can get it from the lender. What happens after you have sent a case
What happens after you have sent a case
You don’t get an automatic acknowledgement, so don’t worry when you don’t hear anything quickly! You will normally be contacted within a couple of weeks and if you didn’t supply a copy of your credit record and your bank statements you may be asked to send these. You can still get bank statements even if your account is closed – if your bank wants to charge you a lot, say you need them for a complaint at the ombudsman about a payday lender and many banks will reduce the charge.
This initial contact is not when an adjudicator picks up your case and starts looking at it. That won’t happen until the payday lander has replied – typically it is between 6-10 weeks at present.
A few problem cases
- Don’t try to get a refund if you are bankrupt now or have been bankrupt in the past – any refund will go to the Official Receiver, not you.
- Don’t bother if you are in an IVA as refunds will go to your IVA firm not to you.
- Don’t apply if you are in a DRO, getting a refund may mean your DRO is cancelled!
- You can’t go to the Ombudsman with non-UK authorised lenders – the main ones were Swift Sterling and Pounds Till Payday, see that article for your options.
What about other sorts of borrowing?
The affordability rules are the same for all lenders. But it is easier to win a complaint where you borrowed a lot from the same lender – single loans can be very hard. You need to be able to show that you couldn’t afford the repayments and the lender should have known.
- For doorstep lenders such as Provident, there are some big refunds being paid. See Getting a refund from a doorstep lender for these complaints.
- If your credit limit kept being increased on credit cards or catalogues, you can make an affordability complaint but these are a bit different, see Can I get an interest refund from a catalogue or credit card?
Need some help?
If you need help to complain, go to your local Citizens Advice, they will help for free. Don’t use a claims management company. They are expensive, may be incompetent and you can make a better claim on your own than they can. A good claim involves telling your own story, not sending a standard letter!
Check out the Comments below – you could ask a question there. The comments are split into pages – use the “older comments” and “newer comments” buttons at the bottom to read them all.